Question

Part A

Which of the following would be included in net income?

A. An unrealized gain on an available for sale debt investmenet as of the end of the accounting period.

B. An unrealized gain as a result of a a foreign currency translation adjustment

C. An unrealized loss on an avaiable for sale debt investment as of the end of the accounting period

D. A gain from the disposal of equipment that occurred on the last day of the accounting period.

Part B. A discontinued operation must be a business segment or unit that is a portion of an entity with operations and cash flows.

True or False.

Answer 1

Gain from disposal of equipment will be included in net income as income is realised during the financial year and will affect (increase) net worth of the business. Where as rest of the incomes or losses are not realised and there is a degree of uncertainty involved. And financial statements include only transactions that have already taken place or are certain.

Part B True, when a unit or segment of business entity fails to give cash inflows it's operations are discontinued to prevent losses.

So, to discontinue operations unit or segment need to be part of Business entity once